UK & Europe
Insurance & Reinsurance
Bed bugs have been around since the dawn of time; originally, they were using bats as hosts and began feeding on humans while we were still living in caves. They were a common sight in the pre-insecticide era, where it is estimated they were resident in 30% of households. Recent years have seen species migrating northwards as temperatures increase.
While the squeamish might wish to look away now, there are considerable risks, including from the business interruption or reputational issues that might follow an infestation.
Bed bug levels globally have been increasing annually since 2006 and are reportedly reaching epidemic levels. The eradication industry is shortly expected to be worth $1bn globally. This exponential increase is believed to be as a result of increasingly hot summers, creating conditions that halve the reproductive lifecycle of the bed bug to eight days, allowing them to flourish like never before. Corporates therefore need to ensure they have suitable risk management procedures in place and appropriate insurance cover to deal with this risk, which is beginning to punch above its weight.
The summer holiday season and increased globalisation of trade allows the critters to hitch a ride throughout the globe. Indeed, it seems they like to travel in style, with British Airways reporting problems in 2017 when passengers on a long-haul flight were infested and flights had to be cancelled after cabin crew refused to work on an infested plane. Such incidents highlight the extent of the loss these seemingly small and insignificant creatures can cause.
Part of the reason why bed bugs have decided to make their comeback now relates to the use of insecticides. Continued use has made them resistant to chemical treatments and has in fact gone some way towards creating ‘super bed bugs’, by permitting only the strongest bugs to evolve. Climate change is only likely to exacerbate the problem further in future.
Problem sectors include hotel and holiday rental businesses (including those businesses operating in the ‘gig economy’), dwellings, nursing homes, schools, office buildings, airlines and other transportation networks. Early detection systems are critical.
Proactive monitoring of hotspots is required, together with an integrated pest eradication approach that involves multiple tactics, such as preventive measures, sanitation and possibly chemicals applied to targeted sites. Identification of the ‘supply’ is critical to eradicate the infestation – if not, the supply will simply be replenished.
Corporates are also advised to consider their general liability insurance policies and any potential exclusions, to ensure they have sufficient business interruption cover to deal with loss of revenue following an infestation. Managing the fallout of a bed bug attack is equally important, with holiday resorts and hotels reporting a reduction in revenue after failing to successfully manage the repercussions of a perceived beg bug problem.
Personal injury claims should also not be discounted for high-risk industries. While bites are usually painless, they will often cause skin irritation and inflammation, as well as severe itching, and produce an allergic reaction in some unlucky victims. Historically, package holiday providers have been worst hit, with both Thomas Cook and TUI seeing claims increase in recent years.
Commonly, claims for personal injury will be low level as pain and discomfort from the bites will be of relatively short duration. However, where children have been bitten, awards may be somewhat higher. Equally, exacerbation of pre-existing skin conditions can inflate any damages entitlement.
Compensation is also sought for associated losses, including loss of enjoyment while on holiday, which can bump up damages levels. There is also the additional risk that claimants will argue they brought the bed bugs home with them, causing infestations in their homes and claiming for resultant removal costs.
Although these claims are harder to prove than holiday sickness claims – and with relatively meagre costs entitlements for claimant representatives, which drove much of the claims-farming activity for these claims in recent years – the potential for business interruption and lost revenue arising from an incident demands robust risk management practices to avoid potential fallout from an infestation.
With the UK’s Civil Liability Act and the new small claims track limits coming into force, bed bug claims could represent a new stream of revenue for certain claimant firms. In the US, which has a more developed culture for such claims, claims have been inflated by adding other heads of losses such as psychological trauma and problems sleeping.
Corporates and their insurers should be on the lookout for similar attempts of inflating damages in the UK.
With this in mind, corporates are advised to monitor this risk carefully to ensure these pesky bugs are not allowed to become snug in their rugs over summertime in preparation for winter.